Scott Morrison has identified 42 councils eligible for the urgent payments, while $18 million has been set aside to offer extra money to local governments worst-affected by the fires.

The money will be put into state government bank accounts on Friday to distribute to councils for immediate use.

"This is initial and urgent - there will be more," the prime minister told reporters on Thursday.

President of the Australian Local Government Association David O'Loughlin said rebuilding was the priority but some money would be set aside for community events to boost resilience.

The bushfires have killed 27 people and destroyed 2131 homes across the country and Mr Morrison has repeated he will consider calling a royal commission into the disaster.

"We are a long way from the end of this crisis and this disaster," Mr Morrison said.

"We will work together (with state and territory governments) to ensure that there's an appropriate inquiry that addresses the broad gamut of issues that must be considered, as we come out of what has been a - just an awful natural disaster."

More than 1600 Army reservists have been dispatched to bushfire operations as conditions worsen along Australia's east coast.

Australian Defence Force psychologists have been deployed across the country to help victims in fire-ravaged areas.

Mr Morrison confirmed five trauma critical medical teams have been sent to NSW and Victoria and he was looking at lifting the 10-visit cap for Medicare-funded mental health services.

The prime minister said the government is pulling together a mental health package, and Labor wants it to include unlimited Medicare-rebatable counselling sessions.

"The government is fully aware of the needs, particularly in mental health," Mr Morrison said.

"I've seen the desolation and the impact not only on the residents but on those who have been directly involved in fighting these fires, and the first responders."

Other measures suggested to the government by Labor include more incentives for GPs to bulk bill, extended telehealth services and better access to respiratory specialists to deal with smoke inhalation.

School students and first responders would also receive specialised mental health support.

Federal Emergency Management Minister David Littleproud and the head of the newly-established bushfire recovery agency, Andrew Colvin, are working on a support package for bushfire-affected businesses.

Small businesses will be eligible for loans up to $500,000 that are repayment-free for two years.

Australian Associated Press